Filed 12/2/19 Freidberg v. Bardis CA3

Received for posting on 12/3/19

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

—-

EDWARD FREIDBERG et al.,

Plaintiffs and Appellants,

v.

CHRISTO BARDIS,

Defendant and Respondent.

C086920

(Super. Ct. No. 34-2013-00147263-CU-FR-GDS)

This is an appeal from an order granting a special motion to strike under Code of Civil Procedure section 425.16, known as the anti-SLAPP statute. The order is appealable under section 904.1, subdivision (a)(13).

Plaintiffs Edward Freidberg and his law firm Freidberg & Parker LLP represented Christo Bardis (Christo), his brother Elias Bardis (Lou), and their nephew Bruce Palmbaum in a number of civil lawsuits. One of these lawsuits was a malicious prosecution action in which Freidberg obtained a settlement in favor of Palmbaum. At the time, Lou owed Freidberg over $186,000 in legal fees for another case. Christo allegedly authorized Freidberg to satisfy Lou’s debt from the settlement proceeds in the malicious prosecution action and Freidberg did so. Palmbaum objected to that distribution and took the matter to arbitration. Before arbitration commenced, Freidberg filed suit against Christo for negligent misrepresentation, fraud, and indemnity. This suit was stayed pending the arbitration. The arbitration panel ruled in favor of Palmbaum. Freidberg then amended his suit against Christo, adding causes of action for breach of contract. Christo responded with a special motion to strike, which the trial court granted.

On appeal, Freidberg contends it was error to dismiss his lawsuit against Christo. He asserts it did not arise from an act in furtherance of free speech; he established there was at least minimal merit to the lawsuit; and the trial court erred in finding the litigation privilege barred all causes of action in the lawsuit.

We find merit in the first contention and reverse. The causes of action in Freidberg’s lawsuit arose from private contractual arbitration and alleged misrepresentations by Christo. As we explain, neither is a protected activity.

BACKGROUND

Christo and Lou are lawyers who are involved in land development and building homes. Christo is the patriarch of the family; he takes care of the others and they turn to him for advice. Palmbaum is the nephew of Christo and Lou, and Christo has provided significant financial assistance to him and other relatives for many years. Since the 1980’s Freidberg has served as legal counsel to Christo and Lou on numerous civil cases.

In 2004 property in Rancho Murrieta worth millions came up for sale at a sheriff’s auction. No other bidders showed up at the auction and Palmbaum, at Christo’s direction, purchased the property for $2,000. Litigation followed and Freidberg represented Palmbaum, with Christo paying the legal fees. Freidberg was successful in obtaining clear title to the property in Palmbaum.

Palmbaum then sued the entities who had clouded his title for malicious prosecution, again with Freidberg as his attorney and Christo paying the legal fees. The malicious prosecution action was Christo’s idea and he directed the litigation. Nonetheless, Palmbaum executed an hourly fee agreement with Freidberg; the agreement provided for arbitration of any disputes. As it became apparent that Christo would file for bankruptcy, Palmbaum’s hourly fee agreement with Freidberg was changed to a contingency fee arrangement. The malicious prosecution case was settled in Palmbaum’s favor for $1,040,000 in July 2011.

Meanwhile, Freidberg had represented Lou in an unrelated action and Lou owed Freidberg $186,790 in legal fees. Lou was having financial difficulties and was unable to pay the fees. In March 2011 Christo, Lou, Freidberg, and Freidberg’s law partner, Port Parker, met at a restaurant. According to Freidberg and Parker, Christo told them Lou’s legal fee debt would be paid out of the malicious prosecution settlement. When Freidberg received the settlement proceeds, he took the amount of Lou’s debt out of them, as well as his contingency fee for the malicious prosecution case.

Palmbaum objected to the distribution to Freidberg and sought arbitration in accordance with the fee agreement. Freidberg filed suit against Christo for negligent misrepresentation, fraud, and indemnity. Palmbaum’s motion to compel arbitration was granted and Freidberg’s case against Christo was stayed pending the arbitration.

The arbitration panel found that Christo had no authority to dictate the distribution of the malicious prosecution settlement. It found the distribution to Freidberg violated both the law and the rules of professional responsibility. It awarded Palmbaum $186,790 (plus other sums not at issue here).

Freidberg then amended the lawsuit against Christo. The second amended complaint (SAC) alleged that Christo was the true owner of the Rancho Murrieta property and it was Christo who hired the firm of Freidberg & Parker to pursue the malicious prosecution action in Palmbaum’s name. At the meeting at the restaurant, Christo authorized payment of Lou’s legal fees from the malicious prosecution settlement. After Freidberg took the fees Lou owed from the settlement, Christo initiated litigation (in Palmbaum’s name) against Freidberg & Parker to recover the $186,790. Christo financed the litigation which commenced with a motion to compel arbitration. Based on Christo’s representations at the restaurant, Freidberg & Parker did not attempt to collect from Lou for unpaid legal fees.

The SAC alleged causes of action for negligent misrepresentation and fraudulent misrepresentation based on Christo’s representations that: (1) The Palmbaum malicious prosecution case was actually Christo’s case with Palmbaum acting on behalf of, and for the benefit of, Christo; (2) Christo had authority to act on behalf of Palmbaum and to authorize payments from any settlement proceeds from the Palmbaum case; and (3) Christo and Freidberg agreed at the restaurant meeting that Friedberg & Parker would forebear collecting the fees Lou owed to Friedberg & Parker and in consideration of that forbearance, Friedberg & Parker could take Lou’s debt from the net settlement proceeds of the Palmbaum malicious prosecution.

The SAC also alleged breach of contract, alleging the oral agreement at the restaurant was breached by Christo instituting and financing the arbitration. It alleged Christo breached the covenant of good faith and fair dealing by obtaining an attorney for Palmbaum, financing the litigation, and testifying in favor of Palmbaum. The fifth cause of action was for indemnity, alleging that Christo’s liability was established by the arbitration award. The sixth cause of action was for promissory estoppel, alleging Christo breached the promise made at the restaurant by causing Palmbaum to initiate arbitration and taking the position that there was no agreement.

Christo answered and then filed a special motion to strike. The motion asserted the protected activity was the litigation and the arbitration. Further, the motion claimed there was no merit to Freidberg’s lawsuit because all the causes of action were barred by the litigation privilege.

Freidberg responded that there was no free speech involved; the lawsuit involved the statements made at the restaurant.

The trial court granted the special motion to strike. The court found the ultimate basis for all the causes of action was the fact that Christo “instituted and financed the Palmbaum arbitration against plaintiffs.” The court further found every cause of action barred by the litigation privilege.

Plaintiffs timely appealed.

DISCUSSION

I

Special Motion to Strike

Section 425.16 provides in part: “[A] cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” (§ 425.16, subd. (b)(1).) “As used in this section, ‘act in furtherance of a person’s right of petition or free speech under the United States or California Constitution in connection with a public issue’ includes: (1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law; (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law . . . .” (Id., subd. (e).)

“Section 4[2]5.16 ‘provides a procedure for weeding out, at an early stage, meritless claims arising from protected activity.’ [Citation.] ‘The Legislature enacted section 425.16 to prevent and deter “lawsuits [referred to as SLAPPs] brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances.” [Citation.] Because these meritless lawsuits seek to deplete “the defendant’s energy” and drain “his or her resources” [citation], the Legislature sought “ ‘to prevent SLAPPs by ending them early and without great cost to the SLAPP target’ ” [citation]. Section 425.16 therefore establishes a procedure where the trial court evaluates the merits of the lawsuit using a summary-judgment-like procedure at an early stage of the litigation. [Citation.] In doing so, section 425.16 seeks to limit the costs of defending against such a lawsuit.’ [Citation.]” (Newport Harbor Ventures, LLC v. Morris Cerullo World Evangelism (2018) 4 Cal.5th 637, 642.)

“Anti-SLAPP motions are evaluated through a two-step process. Initially, the moving defendant bears the burden of establishing that the challenged allegations or claims ‘aris[e] from’ protected activity in which the defendant has engaged. [Citations.] If the defendant carries its burden, the plaintiff must then demonstrate its claims have at least ‘minimal merit.’ ” (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1061 (Park).) We review a trial court’s ruling on a special motion to strike under section 425.16 de novo. (Id. at p. 1067.)

II

Arising from a Protected Activity

In making a prima facie showing at the first step, “it is not enough to establish that the action was filed in response to or in retaliation for a party’s exercise of the right to petition. [Citations.] Rather, the claim must be based on the protected petitioning activity. [Citation.]” (Drell v. Cohen (2014) 232 Cal.App.4th 24, 29.)

In deciding whether the initial “arising from” requirement is met, the focus is on “the defendant’s activity that gives rise to his or her asserted liability—and whether that activity constitutes protected speech or petitioning.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 92.) “Critically, ‘the defendant’s act underlying the plaintiff’s cause of action must itself have been an act in furtherance of the right of petition or free speech.’ ” (Park, supra, 2 Cal.5th at p. 1063.) “[A] cause of action can only be said to arise from protected conduct if it alleges at least one wrongful act—conduct allegedly breaching a duty and thereby injuring the plaintiff—that falls within the act’s definition of protected conduct.” (Old Republic Construction Program Group v. The Boccardo Law Firm, Inc. (2014) 230 Cal.App.4th 859, 869.)

Freidberg contends none of the causes of action in the SAC arise from a protected activity. He contends the causes of action arise either from private contractual arbitration or from Christo’s agreement and misrepresentations and this conduct is not in furtherance of the right of petitioning or free speech and therefore is not a protected activity. We consider the private contractual arbitration and the misrepresentations separately.

A. Private Contractual Arbitration

The breach of contract claims and the claim for promissory estoppel allege that Christo breached his agreement and promise to Freidberg, by instituting and financing Palmbaum’s arbitration against Freidberg. The claim for equitable indemnity alleges Christo’s liability was established by the arbitration award. Thus, as the trial court found, the basis for these claims “is the fact that Defendant instituted and financed the Palmbaum arbitration.” Freidberg contends these claims do not arise from protected activity because private arbitration is not a protected activity.

Christo objects that Freidberg is improperly raising a new theory on appeal. Freidberg did not argue that private arbitration was not a protected activity in the trial court.

“ ‘As a general rule, failure to raise a point in the trial court constitutes of waiver and appellant is estopped to raise that objection on appeal. An exception to the general rule may be presented, however, where the theory presented for the first time on appeal involves only a legal question determinable from facts which not only are uncontroverted in the record, but which could not be altered by the presentation of additional evidence. [Citation.] And whether the general rule shall be applied is largely a question of the appellate court’s discretion.’ ” (In re Marriage of Priem (2013) 214 Cal.App.4th 505, 510-511.) Because the question of whether private arbitration is a protected activity presents a pure legal issue and because our review is de novo, we exercise our discretion to consider the question.

The fee agreement between Freidberg and Palmbaum provided for binding arbitration to settle disputes. It also gave the client the option of selecting non-binding arbitration with de novo review rights pursuant to Business and Professions Code sections 6200-6206. Palmbaum selected binding arbitration, petitioning to compel arbitration pursuant to section 1281.2.

The first two categories of protected activity protect statements made in a “judicial proceeding, or any other official proceeding authorized by law” (§ 425.16, subd. (e)) or “in connection with an issue under consideration or review by a . . . judicial body, or any other official proceeding authorized by law.” (§ 425.16, subd. (e).)

The case law is clear that private contractual arbitration is not a protected activity under section 425.16. “Arbitration is not a judicial proceeding—it is an alternative thereto.” (Century 21 Chamberlain & Associates v. Haberman (2009) 173 Cal.App.4th 1, 8 (Haberman).) “Contractual arbitration is not a ‘judicial proceeding’; it is an alternative dispute resolution process that bypasses judicial proceedings.” (Zhang v. Jenevein (2019) 31 Cal.App.5th 585, 593.) “[A]n arbitrator is not a ‘judicial body’ and an arbitration proceeding is not an ‘official proceeding’ within the meaning of section 425.16, subdivisions (e)(1) and (2).” (MMM Holdings, Inc. v. Reich (2018) 21 Cal.App.5th 167, 179, fn. 12.) “When nongovernmental entities are involved, courts have limited ‘official proceeding’ anti-SLAPP protection to (1) quasi-judicial proceedings that are part of a ‘comprehensive’ statutory licensing scheme and ‘subject to judicial review by administrative mandate’ [citation], and (2) proceedings ‘established by statute to address a particular type of dispute’ [citation]. Unlike hospital peer review, arbitration is not part of a comprehensive statutory licensing scheme and not reviewable by administrative mandate. And unlike mandatory fee arbitration, private arbitration is not required by statute.” (Haberman, supra, 173 Cal.App.4th at p. 9.)

Christo appears to argue that arbitration is not a protected activity only to the extent the anti-SLAPP motion seeks to strike a claim asserted only in the arbitral forum, not in a civil lawsuit. That was the narrow issue decided in Sheppard v. Lighthouse Museum Fund (2006) 146 Cal.App.4th 315, a case upon which Freidberg relies. “We conclude that section 425.16 does not authorize a superior court to grant a motion to strike an arbitration claim filed only in an agreed arbitral forum and not asserted by the claimant in any complaint, cross-complaint or petition filed in court.” (Id. at p. 318.) The limited scope of this holding was recognized in Haberman, supra, 173 Cal.App.4th at page 8, footnote 4.

Other cases have not been so narrow in their holdings. For example, in Zhang v. Jenevein, supra, 31 Cal.App.5th 585, defendant secretly recorded conversations for use in arbitration. Zhang filed suit for invasion of privacy and defendant responded with an anti-SLAPP motion. (Id. at p. 591.) The appellate court affirmed denial of the motion, rejecting defendant’s contention that contractual arbitration was a “judicial proceeding” or an “official proceeding authorized by law.” (Id. at p. 593-594.) “That a party to an arbitration agreement may resort to the courts to compel arbitration or confirm or enforce an arbitration award does not convert the arbitration proceeding into a judicial or official proceeding within the meaning of section 425.16.” (Id. at p. 596.)

The initiation of a State Bar sponsored fee arbitration proceeding has been found to be a protected activity under section 425.16. (Philipson & Simon v. Gulsvig (2007) 154 Cal.App.4th 347, 358.) Although that type of arbitration was an option under the fee agreement, as discussed, the arbitration at issue here was private contractual arbitration.

Christo next contends that funding arbitration is a protected activity. The authority he cites does not support this assertion. Funding prosecution of a civil action is a protected activity because it is communicative conduct that is part of the litigation activity. (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056.) Christo fails to explain why funding arbitration is a protected activity when participating in it is not.

B. The Alleged Misrepresentations

The SAC alleged two tort causes of action, negligent misrepresentation and fraudulent misrepresentation. The harmful conduct that is the basis of these causes of action is the negligent or intentional misrepresentation of material facts. (Feldman v. 1100 Park Lane Associates (2008) 160 Cal.App.4th 1467, 1484 [anti-SLAPP statute appears not to apply to negligent misrepresentation claim because gravamen of claim was misleading statements and representations].) Christo contends the entire SAC is predicated on the allegations of Christo’s misrepresentations.

Christo contends the statements alleged to be misrepresentations are protected activity because they “were made in connection with several lawsuits or actions related to lawsuits pending at the time.” Not every statement relating to litigation is a protected activity. The statement must be “made in connection with an issue under consideration or review by a . . . judicial body.” (§ 425.16, subd. (e).) “[A] statement is ‘in connection with’ litigation under section 425.16, subdivision (e)(2) if it relates to the substantive issues in the litigation and is directed to persons having some interest in the litigation.” (Neville v. Chudacoff (2008) 160 Cal.App.4th 1255, 1266.) “[I]t is insufficient to assert that the acts alleged were ‘in connection with’ an official proceeding. There must be a connection with an issue under review in that proceeding.” (Paul v. Friedman (2002) 95 Cal.App.4th 853, 867.)

The alleged misrepresentations are not protected activity. They related to the attribution of the malicious prosecution case to Christo rather than Palmbaum, and Christo’s authority to direct distribution from the malicious prosecution settlement to pay Lou’s legal fees. While these statements were substantive issues in the arbitration, there is no evidence in the record that these were “substantive issues in the litigation” or an issue under judicial review. They were not at issue in the malicious prosecution action and the SAC does not reveal the nature of Lou’s lawsuit, except that part of it was resolved in arbitration.

The trial court erred in granting the special motion to strike. None of the causes of action in the SAC arose out of protected activity. Because Christo failed to carry his burden at the first step of the anti-SLAPP analysis, we reverse the trial court’s order and need not consider the second step of the anti-SLAPP analysis, whether the SAC has minimal merit.

DISPOSITION

The judgment (order) is reversed. Freidberg shall recover costs on appeal. (Cal. Rules of Court, rule 8.278(a).)

/s/

Duarte, J.

We concur:

/s/

Hull, Acting P. J.

/s/

Krause, J.